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The Insurance Regulatory and Development Authority of India has issued a draft set of guidelines, revamping the commission structure for the insurance sector. This is a step in the right direction as it carries the potential to enhance persistency, cost metrics, and penetration of life insurance in the country.
The regulation will usher in greater discipline in the sale of insurance products as it links the commission rate of intermediaries to the persistency status of the policies sold unlike the earlier regime, where payouts were based on the premium paying term.
The draft benefits players operating with a lean cost structure as it allows companies with expenses of management at sub-70% of allowable limits to design a customised commission structure as per the board approved policy. This can drive a product mix of choice and boost margin and value of new business.
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